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According to SEC filings, America’s oldest bank has blamed the underperformance of its small-cap ETF on a failure to purchase MicroStrategy shares after the company invested heavily in BTC.
The recent success of one of its exchange-traded funds, or ETFs, was dramatically affected by its lack of exposure to companies trading in Bitcoin, according to BNY Mellon, the world’s largest custodian bank and asset servicing firm headquartered in the United States.
The BNY Mellon Opportunistic Small Cap Fund (DSCVX) gained 35% from September 1, 2020 to February 28, 2021, behind its benchmark, the Russell 2000 Index, which gained 41.7 percent over the same time.
According to SEC filings, the company regrets not buying stock of leading market analytics firm MicroStrategy (MSTR), which spent billions in Bitcoin last year, reserves that have now risen to more than $4.8 billion. According to the filings:Most wo
“Fund performance was hurt as well by a decision not to own MicroStrategy, whose stock surged when it announced it had invested in Bitcoin.”
The document also notes that the fund’s position in gold mining company, Alamos Gold, “hampered performance as shares were hurt by weak gold prices.”
According to ETF.com, 88 ETFs are currently exposed to MicroStrategy, including the Amplify Transformational Data Sharing ETF (BLOK), which is heavily exposed to crypto companies and is the single-largest investor of MSTR by percentage distribution, with 5.20 percent of its portfolio invested in MicroStrategy.
MicroStrategy has received 0.57 percent of capital from ETFs based in the United States on average.
Since confirming its first Bitcoin investment in August 2020, MicroStrategy has amassed $2.2 billion in BTC, with the company’s crypto holdings increasing in value by 120 percent.
Over the same period, the price of MSTR has skyrocketed by 385% from $135 to $655 at the time of writing. In early February, MSTR was trading at record highs above $1,270.
BNY’s small-cap ETF usually spends at least 80% of its funds in the stocks of Russell 2000 Index firms with a limited market capitalisation. North American airline SkyWest, business cloud provider Cloudera, and healthcare provider Acadia are among the fund’s highest distributions. About 23% of its assets are in the manufacturing sector, 17.5 percent in healthcare, 15.9% in telecommunications, and 14.2% in financial services.
After beginning 2020 trading at around 27.5 percent, DSCVX fell as low as $16 in March as the economic effects of the coronavirus became clear around the world. Since then, the fund’s price has more than doubled to more than $37.
Despite regretting its Opportunistic Small Cap Fund’s lack of MSTR exposure, BNY Mellon is making substantial investments in the crypto market, including leading the $133 million Series C funding round of institutional crypto custodian Fireblocks last month.
In February, BNY Mellon also announced plans to offer Bitcoin custody services.